Dedicated risk management line of credit

a risk management and line of credit technology, applied in the field of financial services products and systems of risk management, can solve the problems of increased premiums, increased premiums, and no longer available lower deductibles

Inactive Publication Date: 2004-04-22
SCHORB ROBERT B
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  • Summary
  • Abstract
  • Description
  • Claims
  • Application Information

AI Technical Summary

Problems solved by technology

Risks may include damage to property, liabilities, medical costs, disability and loss of life and if the entity is an employer, these risks may also include employee benefit programs and other coverage necessary to maintain business relationships.
However, due to economic pressures on insurance carriers, premiums paid by all entities have continually increased.
Economic pressures also have caused the insurance carriers to limit the number of plans they offer so that in many instances only higher deductible programs are available.
The result, for some lines of coverage, is that premium increases have continued to escalate and that lower deductibles are no longer available, even if the premium was affordable.
This has a

Method used

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  • Dedicated risk management line of credit
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Examples

Experimental program
Comparison scheme
Effect test

second embodiment

[0027] the invention is directed to a method for managing the retention of risk. This method provides an evaluation and projection of the financial impact associated with risk retention and enables calculation of the real cost to the entity of various risk retention amounts. The end results of the calculations, based on various risk retention amounts, can be compared with one another so that the entity can select the optimal (i.e. lowest annual cost) combinations of insurance premiums and retained risk. This embodiment also provides a method and apparatus for determining when a dedicated line of credit is an advantageous supplement or alternative to insurance for the entity. To that extent, the higher degree of probability associated with the claim data, the greater chance the use of this method of managing the retention of risk will reduce cost to the entity. This embodiment does not provide certainty of the amounts of claims, it merely quantifies the cost of the claims projected a...

example

[0031] In order to provide an accurate comparison of the cost of insurance to the entity, the true cost needs to be determined over the same length of time the entity has to pay back any amounts used from the dedicated line of credit. As shown in FIG. 1, the actual cost to an entity of obtaining insurance is calculated through a number of steps. First, the entity determines the insurance premium (P.sub.i) 101 for a desired term of insurance coverage. Typically, the term of the insurance coverage is one year. However, any period of coverage could be used. As mentioned above, the entity must also determine the term of the dedicated line of credit (T.sub.L) 102 and the additional duration (D) 103 for paying back the amount used from the dedicated line of credit so that cost comparisons for use of the dedicated line of credit are equivalent.

[0032] Next, the entity estimates its rate of return (R.sub.yr) 105 from operations over the same length of time D and T.sub.L. R.sub.yr is the meas...

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Abstract

A dedicated line of credit restricted to use for eligible demands from claimants, and a method for managing the retention of risk. The dedicated line of credit is available for an amount of time roughly equal to the term of coverage of a corresponding insurance policy. The method for managing the retention of risk comprises determining an estimate for the amount of future claims, calculating the cost of insurance, determining the entity's optimum amount of retained risk and providing a mechanism to pay the portion of claims for which the entity has retained responsibility.

Description

[0001] Provisional Application Serial No. 60 / 391,481, filed Jun. 25, 2002[0002] Not Applicable.[0003] 1. Field of the Invention[0004] This present invention relates generally to a financial service product and system of risk management and, is more specifically directed to a dedicated line of credit and methodology for managing a person or entity's amount of retained exposure to future undetermined liabilities.[0005] 2. Description of Related Art[0006] Traditionally, entities, whether individual or corporate which are not insurance or re-insurance companies, protect themselves against perceived risks by purchasing insurance. Risks may include damage to property, liabilities, medical costs, disability and loss of life and if the entity is an employer, these risks may also include employee benefit programs and other coverage necessary to maintain business relationships. However, due to economic pressures on insurance carriers, premiums paid by all entities have continually increased.[...

Claims

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Application Information

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IPC IPC(8): G06Q40/08
CPCG06Q40/08
Inventor SCHORB, ROBERT B.
Owner SCHORB ROBERT B
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